Charging your electric car at home could get cheaper under Andy Burnham’s VAT plan
Car changing is a big deal
New prime minister Andy Burnham has proposed removing VAT from household electricity bills. Here’s what the move could mean for electric car owners who rely on home charging.
New prime minister Andy Burnham has unveiled his first major policy since taking office, announcing plans to scrap VAT on household electricity bills from October in a move that could lower energy costs for millions of homes.
The government says removing the 5% VAT rate will save the average household around £45 a year. Ministers say the tax cut will be funded by scrapping Keir Starmer’s proposed digital ID scheme.
Burnham said during this announcement: “Westminster has not been working for people for too long, with families struggling with the cost of living.
“That needs to change. I said I wanted to give people breathing space, and that’s what I’m announcing on my second day as Prime Minister.
“We’re taking immediate action to cut taxes on energy bills, put more money in people’s pockets and bring back hope.”
Newly appointed business secretary Jonathan Reynolds told BBC Breakfast the additional £45 saving on household electricity bills would come on top of the £150 in savings announced in the last Budget.
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What does this mean for EV owners
The Ofgem energy price cap for households on a standard variable tariff is currently 26.11p per kWh, including VAT, for the period from 1 July to 30 September 2026. At that rate, it costs around £26.11 to fully charge a 100kWh electric car from 0% to 100% at home.
Ofgem will announce the energy price cap for 1 October to 31 December 2026 on 26 August. When the government’s plan to remove the 5% VAT on household electricity bills takes effect from October, the amount households pay for electricity should fall by around 4.8%, so long as suppliers pass on the full tax cut.
The reduction is slightly below 5% because VAT is added to the pre-tax price, meaning removing it cuts the final bill by a smaller proportion.
If you regularly charge your car at home, that means every charge should become slightly cheaper. Based on today’s capped rate, a full charge for a 100kWh battery would fall from £26.11 to around £24.87, saving approximately £1.24 per full charge.
While that may not sound like a huge saving, it can add up over the course of a year. Charging a 100kWh EV from empty to full once a week could save around £65 annually, while households with more than one electric car or drivers who cover high mileages could save even more.
However, the proposed VAT cut would only apply to household electricity, meaning drivers who rely on public charging networks would continue to pay the standard 20% VAT rate on charging sessions. That comes despite a First-tier Tribunal ruling in March that the reduced 5% domestic VAT rate should apply to public EV charging, rather than the current 20% rate paid by drivers.
The ruling has renewed calls for the government to equalise VAT on public and home charging, but no changes to public charging VAT have been announced.
The government says it expects all energy suppliers to pass the VAT reduction on to customers, including those on fixed tariffs, meaning households should see the lower tax reflected automatically in their electricity bills from October.
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